Finding 2022-001: Equipment and Real Property Management (Repeat Finding 2021-001) Program Name: National Railroad Passenger Corporation Grants COVID-19 National Railroad Passenger Corporation Grants Assistance Listing No. 20.315 Federal Award No.: FR-AMT-0020-20 FR-AMT-0022-21 FR-AMT-0025-22 FR-AMT-0026-22 Federal Agency: U.S. Department of Transportation Criteria The code of federal regulations ? 2 CFR 200.313 Equipment requires that: 1. Equipment must be used in the program or project for which it was acquired as long as needed, whether the project or program continues to be supported by the federal award or, when appropriate, under other Federal awards; however, the non Federal entity must not encumber the equipment without prior approval of the federal awarding agency (2 CFR 200.313(c) and (e)). 2. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data, including the date of disposal and sales price of the property (2 CFR 200.313(d)(1)). 3. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years (2 CFR 200.313(d)(2)). 4. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated (2 CFR 200.313(d)(3)). 5. Adequate maintenance procedures must be developed to keep the property in good condition (2 CFR 200.313(d)(4)). The code of federal regulations ? 2 CFR 200.303 ? Internal Controls requires that non-Federal entities must: 6. Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings (2 CFR 200.303(d)). Condition The following exceptions to the criteria were observed during the performance of the audit procedures: 1. For one of the equipment samples reviewed, it was observed that the asset did not have a unique asset identifier in the originally provided equipment population. 2. For seventeen of the equipment samples reviewed, it was observed that for six of them, the Condition data or Location field in the asset records was blank and, for twelve equipment samples, the Location field and/or Condition data per the asset records did not match the actual physical location and/or condition of the asset. We understand that was due to the assets records not being updated in a timely manner with the actual status of the equipment in the field. 3. During our procedures performed for seven assets, we identified that no inventory had occurred for the asset, even though it had been placed in service over two years prior and would have required an inventory prior to our observation. As this came to our attention after the inventory was required and during our observation procedures, we investigated further and could not obtain alternative evidence to support that an inventory had occurred within the two-year period. 4. This is a repeat finding that has occurred over the last several audit periods. As such, Amtrak has not taken sufficient actions when instances of noncompliance are identified through audit findings to make necessary updates to their internal controls. Questioned Costs None. Context We selected 60 equipment items for internal control and compliance testing of the above attributes. Exceptions as described in the Condition section above were noted for matters 2, 3 and 6 in the Criteria section above, indicating that internal controls were not functioning as designed. No exceptions were noted for matters 1, 4, or 5 in the Criteria section above. Amtrak has had the same repeat finding for the last several audit periods. As exceptions were noted related to matter 6 in the Criteria section above, Amtrak has not taken sufficient actions to address audit findings related to their equipment internal controls. Effect Amtrak is in non-compliance with the related grant agreement. Additionally, when assets are not accurately identified, it could lead to logistical inefficiencies as well as the difficulty in locating and identifying equipment timely. Cause The nature of much of Amtrak?s equipment is composed of moving assets that are on the tracks and operating up and down the corridors or around the yards or moving from location to location in a geographical region to achieve daily operational objectives. Furthermore, Amtrak resources are deployed such that managers and supervisors oversee geographical regions and equipment that are located throughout various routes that often connect through multiple states with many unmanned and less traveled stations. Asset locations, including changes on short notice for where the asset will be used, and frequent inspections occur in order to keep the equipment operating safely; however, the system of record is not always updated or updated in a timely manner to reflect the location and condition of the asset in the records upon a change in asset custody. Amtrak?s equipment policy, which is inconsistent with Uniform Guidance, currently requires that the condition field be confirmed and updated as part of the two-year inventory observation requirement. In reviewing management?s controls, the key controls identified by management are not designed such that consistent and timely proactive monitoring and/or review occurs to ensure that an inventory occurs no less than once every two years. There is an identified control that stipulates ?Capital Accounting staff contact personnel in each department to obtain updated information pertaining to the observation of every two-year inventory process.? This control as designed is not preventive and may not identify the non-compliance risk until after non-compliance occurs. For the instances where the unique identifier did not match the asset records, this was caused by a clerical/human error in recording the asset details in the system in addition to a lack of review control to verify the accuracy of the data recording. Identification as a Repeat Finding This finding was identified as a repeat finding in the immediate prior year as Finding 2021-001. Recommendation We recommend that Amtrak continue to work toward a full integration or reconciliation between Amtrak?s fixed asset system of record and the different equipment-tracking systems. We recommend that management consider redesigning one of its key controls to help ensure that the monitoring of the observations is occurring on a preventive basis to help identify any exposure to non-compliance before it occurs. For example, Amtrak should consider an automated system report that would flag an asset proactively when a 2-year inventory deadline is approaching. During the observation process, management should ensure there is a review control within the process to validate that the asset is accurately tagged and such identifying information matches the equipment-tracking system. Additionally, this review control should also be performed when the asset is first logged into the equipment-tracking system. In the interim, until such processes are fully implemented, Amtrak should enhance the current control procedures surrounding the asset documentation and ensure that field personnel are aware of and consistently and carefully updating the asset records such that clerical/human errors are minimized and that the asset records contain the necessary asset details in order to properly track equipment by federal requirements. This would include enhancing the asset chain of custody recordkeeping so that such changes are identified and reported timely. Views of Responsible Officials Amtrak agrees with the recommendation to redesign key controls to help ensure that the monitoring of the observations happens on a preventive basis to help identify any exposure to non-compliance before it occurs. Amtrak recognizes that remediation of this finding will require an investment in the organization structure and the technology solutions available to the company. Since being created in early 2022 the Asset Management team has completed, with support from an outside consulting firm, a baseline assessment, as well as corrective action plans to specifically address noncompliance identified in the audit finding. To mitigate this finding, resources and investments are needed to address policy and governance around single auditable assets, the people and processes needed for a cradle-to-grave oversight of equipment management, and the technology needed to assist with creating and maintaining more robust internal controls, compliance, and timely audits. Efforts are underway that involve creating preventative internal controls, training of key personnel to help ensure that there is an end-to-end equipment lifecycle approach and accountability throughout an asset?s lifecycle, and the technology needed to support better location tracking of assets, the completion of audits, and recordkeeping. Finally, it is important to note that there has been a 31% year-over-year reduction in the total number of exceptions from thirty-six to twenty-five.
Finding 2022-001: Equipment and Real Property Management (Repeat Finding 2021-001) Program Name: National Railroad Passenger Corporation Grants COVID-19 National Railroad Passenger Corporation Grants Assistance Listing No. 20.315 Federal Award No.: FR-AMT-0020-20 FR-AMT-0022-21 FR-AMT-0025-22 FR-AMT-0026-22 Federal Agency: U.S. Department of Transportation Criteria The code of federal regulations ? 2 CFR 200.313 Equipment requires that: 1. Equipment must be used in the program or project for which it was acquired as long as needed, whether the project or program continues to be supported by the federal award or, when appropriate, under other Federal awards; however, the non Federal entity must not encumber the equipment without prior approval of the federal awarding agency (2 CFR 200.313(c) and (e)). 2. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data, including the date of disposal and sales price of the property (2 CFR 200.313(d)(1)). 3. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years (2 CFR 200.313(d)(2)). 4. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated (2 CFR 200.313(d)(3)). 5. Adequate maintenance procedures must be developed to keep the property in good condition (2 CFR 200.313(d)(4)). The code of federal regulations ? 2 CFR 200.303 ? Internal Controls requires that non-Federal entities must: 6. Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings (2 CFR 200.303(d)). Condition The following exceptions to the criteria were observed during the performance of the audit procedures: 1. For one of the equipment samples reviewed, it was observed that the asset did not have a unique asset identifier in the originally provided equipment population. 2. For seventeen of the equipment samples reviewed, it was observed that for six of them, the Condition data or Location field in the asset records was blank and, for twelve equipment samples, the Location field and/or Condition data per the asset records did not match the actual physical location and/or condition of the asset. We understand that was due to the assets records not being updated in a timely manner with the actual status of the equipment in the field. 3. During our procedures performed for seven assets, we identified that no inventory had occurred for the asset, even though it had been placed in service over two years prior and would have required an inventory prior to our observation. As this came to our attention after the inventory was required and during our observation procedures, we investigated further and could not obtain alternative evidence to support that an inventory had occurred within the two-year period. 4. This is a repeat finding that has occurred over the last several audit periods. As such, Amtrak has not taken sufficient actions when instances of noncompliance are identified through audit findings to make necessary updates to their internal controls. Questioned Costs None. Context We selected 60 equipment items for internal control and compliance testing of the above attributes. Exceptions as described in the Condition section above were noted for matters 2, 3 and 6 in the Criteria section above, indicating that internal controls were not functioning as designed. No exceptions were noted for matters 1, 4, or 5 in the Criteria section above. Amtrak has had the same repeat finding for the last several audit periods. As exceptions were noted related to matter 6 in the Criteria section above, Amtrak has not taken sufficient actions to address audit findings related to their equipment internal controls. Effect Amtrak is in non-compliance with the related grant agreement. Additionally, when assets are not accurately identified, it could lead to logistical inefficiencies as well as the difficulty in locating and identifying equipment timely. Cause The nature of much of Amtrak?s equipment is composed of moving assets that are on the tracks and operating up and down the corridors or around the yards or moving from location to location in a geographical region to achieve daily operational objectives. Furthermore, Amtrak resources are deployed such that managers and supervisors oversee geographical regions and equipment that are located throughout various routes that often connect through multiple states with many unmanned and less traveled stations. Asset locations, including changes on short notice for where the asset will be used, and frequent inspections occur in order to keep the equipment operating safely; however, the system of record is not always updated or updated in a timely manner to reflect the location and condition of the asset in the records upon a change in asset custody. Amtrak?s equipment policy, which is inconsistent with Uniform Guidance, currently requires that the condition field be confirmed and updated as part of the two-year inventory observation requirement. In reviewing management?s controls, the key controls identified by management are not designed such that consistent and timely proactive monitoring and/or review occurs to ensure that an inventory occurs no less than once every two years. There is an identified control that stipulates ?Capital Accounting staff contact personnel in each department to obtain updated information pertaining to the observation of every two-year inventory process.? This control as designed is not preventive and may not identify the non-compliance risk until after non-compliance occurs. For the instances where the unique identifier did not match the asset records, this was caused by a clerical/human error in recording the asset details in the system in addition to a lack of review control to verify the accuracy of the data recording. Identification as a Repeat Finding This finding was identified as a repeat finding in the immediate prior year as Finding 2021-001. Recommendation We recommend that Amtrak continue to work toward a full integration or reconciliation between Amtrak?s fixed asset system of record and the different equipment-tracking systems. We recommend that management consider redesigning one of its key controls to help ensure that the monitoring of the observations is occurring on a preventive basis to help identify any exposure to non-compliance before it occurs. For example, Amtrak should consider an automated system report that would flag an asset proactively when a 2-year inventory deadline is approaching. During the observation process, management should ensure there is a review control within the process to validate that the asset is accurately tagged and such identifying information matches the equipment-tracking system. Additionally, this review control should also be performed when the asset is first logged into the equipment-tracking system. In the interim, until such processes are fully implemented, Amtrak should enhance the current control procedures surrounding the asset documentation and ensure that field personnel are aware of and consistently and carefully updating the asset records such that clerical/human errors are minimized and that the asset records contain the necessary asset details in order to properly track equipment by federal requirements. This would include enhancing the asset chain of custody recordkeeping so that such changes are identified and reported timely. Views of Responsible Officials Amtrak agrees with the recommendation to redesign key controls to help ensure that the monitoring of the observations happens on a preventive basis to help identify any exposure to non-compliance before it occurs. Amtrak recognizes that remediation of this finding will require an investment in the organization structure and the technology solutions available to the company. Since being created in early 2022 the Asset Management team has completed, with support from an outside consulting firm, a baseline assessment, as well as corrective action plans to specifically address noncompliance identified in the audit finding. To mitigate this finding, resources and investments are needed to address policy and governance around single auditable assets, the people and processes needed for a cradle-to-grave oversight of equipment management, and the technology needed to assist with creating and maintaining more robust internal controls, compliance, and timely audits. Efforts are underway that involve creating preventative internal controls, training of key personnel to help ensure that there is an end-to-end equipment lifecycle approach and accountability throughout an asset?s lifecycle, and the technology needed to support better location tracking of assets, the completion of audits, and recordkeeping. Finally, it is important to note that there has been a 31% year-over-year reduction in the total number of exceptions from thirty-six to twenty-five.
Finding 2022-002: Preparation of Schedule of Expenditures of Federal Awards (Repeat Finding 2021-02) Program Name: Railroad Rehabilitation and Improvement Financing Program Assistance Listing No. 20.316 Federal Award No.: RRIF_2016_0040 Federal Agency: U.S. Department of Transportation Criteria The code of federal regulations ? 2 CFR 200.510(b)(5) and 2 CFR 200.502(b) require that: (a) For loan or loan guarantee programs described in 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule. (b) Loan and loan guarantees (loans). Since the Federal Government is at risk for loans until the debt is repaid, the following guidelines must be used to calculate the value of Federal awards expended under loan programs, except as noted in paragraphs (c) and (d) of 2 CFR 200.502: (1) Value of new loans made or received during the audit period; plus (2) Beginning of the audit period balance of loans from previous years for which the Federal Government imposes continuing compliance requirements; plus (3) Any interest subsidy, cash, or administrative cost allowance received. Condition The following exception to the criteria was observed during the performance of the audit procedures: In the preparation of the Schedule of Expenditures of Federal Awards (SEFA) which was provided to EY in relation to FY22 Uniform Guidance audit, Amtrak incorrectly presented the balance of the federal program Assistance Listing #20.316 - Railroad Rehabilitation and Improvement Financing by not reducing the loan amount by the FY21 loan repayments of $39 million. Amtrak provided EY an updated SEFA which corrected the presented balance to account for loan repayments made. Questioned Costs None. Context We have performed procedures to reconcile underlying data to amounts reported on the SEFA. Exception as described in the Condition section above were noted for the matter under 2 CFR 200.502 (b)(2) within the Criteria section, indicating that internal controls were not functioning as designed. Effect Amtrak?s control procedures in place as it relates to the preparation of the SEFA were not designed in such a manner that would timely identify the conditions noted. The effect of the condition above led to an initially overstated SEFA by $39.0 million. The SEFA within has been adjusted for this overstatement. Cause The exception from the criteria noted is attributed to the following cause: 1. Overall lack of familiarity with the Uniform Guidance Requirement stipulated within 2 CFR 200. Identification as a Repeat Finding The finding related to the Criteria above was identified as a repeat finding in the immediate prior year as Finding 2021-002. Recommendation To address the Condition identified above, we recommend Amtrak to ensure that SEFA preparation policy and review procedures that have been established address appropriate preparation of the SEFA in accordance with 2 CFR 200 requirements for presentation and disclosure. Additionally, management should consider requiring key Grants Management personnel take advanced Uniform Guidance training and annual updates, as made available. Views of Responsible Officials Amtrak agrees with the recommendation to review and enhance the SEFA preparation procedures to ensure full compliance with 2 CFR Part 200 requirements. In FY22 Amtrak expanded the grants management team and hired an additional Director level position to ensure the grants management team is adequately staffed. Amtrak recognizes the importance of keeping personnel up to date with changes to regulations and will consider providing Uniform Guidance training to key personnel on an annual basis.
Finding 2022-001: Equipment and Real Property Management (Repeat Finding 2021-001) Program Name: National Railroad Passenger Corporation Grants COVID-19 National Railroad Passenger Corporation Grants Assistance Listing No. 20.315 Federal Award No.: FR-AMT-0020-20 FR-AMT-0022-21 FR-AMT-0025-22 FR-AMT-0026-22 Federal Agency: U.S. Department of Transportation Criteria The code of federal regulations ? 2 CFR 200.313 Equipment requires that: 1. Equipment must be used in the program or project for which it was acquired as long as needed, whether the project or program continues to be supported by the federal award or, when appropriate, under other Federal awards; however, the non Federal entity must not encumber the equipment without prior approval of the federal awarding agency (2 CFR 200.313(c) and (e)). 2. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data, including the date of disposal and sales price of the property (2 CFR 200.313(d)(1)). 3. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years (2 CFR 200.313(d)(2)). 4. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated (2 CFR 200.313(d)(3)). 5. Adequate maintenance procedures must be developed to keep the property in good condition (2 CFR 200.313(d)(4)). The code of federal regulations ? 2 CFR 200.303 ? Internal Controls requires that non-Federal entities must: 6. Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings (2 CFR 200.303(d)). Condition The following exceptions to the criteria were observed during the performance of the audit procedures: 1. For one of the equipment samples reviewed, it was observed that the asset did not have a unique asset identifier in the originally provided equipment population. 2. For seventeen of the equipment samples reviewed, it was observed that for six of them, the Condition data or Location field in the asset records was blank and, for twelve equipment samples, the Location field and/or Condition data per the asset records did not match the actual physical location and/or condition of the asset. We understand that was due to the assets records not being updated in a timely manner with the actual status of the equipment in the field. 3. During our procedures performed for seven assets, we identified that no inventory had occurred for the asset, even though it had been placed in service over two years prior and would have required an inventory prior to our observation. As this came to our attention after the inventory was required and during our observation procedures, we investigated further and could not obtain alternative evidence to support that an inventory had occurred within the two-year period. 4. This is a repeat finding that has occurred over the last several audit periods. As such, Amtrak has not taken sufficient actions when instances of noncompliance are identified through audit findings to make necessary updates to their internal controls. Questioned Costs None. Context We selected 60 equipment items for internal control and compliance testing of the above attributes. Exceptions as described in the Condition section above were noted for matters 2, 3 and 6 in the Criteria section above, indicating that internal controls were not functioning as designed. No exceptions were noted for matters 1, 4, or 5 in the Criteria section above. Amtrak has had the same repeat finding for the last several audit periods. As exceptions were noted related to matter 6 in the Criteria section above, Amtrak has not taken sufficient actions to address audit findings related to their equipment internal controls. Effect Amtrak is in non-compliance with the related grant agreement. Additionally, when assets are not accurately identified, it could lead to logistical inefficiencies as well as the difficulty in locating and identifying equipment timely. Cause The nature of much of Amtrak?s equipment is composed of moving assets that are on the tracks and operating up and down the corridors or around the yards or moving from location to location in a geographical region to achieve daily operational objectives. Furthermore, Amtrak resources are deployed such that managers and supervisors oversee geographical regions and equipment that are located throughout various routes that often connect through multiple states with many unmanned and less traveled stations. Asset locations, including changes on short notice for where the asset will be used, and frequent inspections occur in order to keep the equipment operating safely; however, the system of record is not always updated or updated in a timely manner to reflect the location and condition of the asset in the records upon a change in asset custody. Amtrak?s equipment policy, which is inconsistent with Uniform Guidance, currently requires that the condition field be confirmed and updated as part of the two-year inventory observation requirement. In reviewing management?s controls, the key controls identified by management are not designed such that consistent and timely proactive monitoring and/or review occurs to ensure that an inventory occurs no less than once every two years. There is an identified control that stipulates ?Capital Accounting staff contact personnel in each department to obtain updated information pertaining to the observation of every two-year inventory process.? This control as designed is not preventive and may not identify the non-compliance risk until after non-compliance occurs. For the instances where the unique identifier did not match the asset records, this was caused by a clerical/human error in recording the asset details in the system in addition to a lack of review control to verify the accuracy of the data recording. Identification as a Repeat Finding This finding was identified as a repeat finding in the immediate prior year as Finding 2021-001. Recommendation We recommend that Amtrak continue to work toward a full integration or reconciliation between Amtrak?s fixed asset system of record and the different equipment-tracking systems. We recommend that management consider redesigning one of its key controls to help ensure that the monitoring of the observations is occurring on a preventive basis to help identify any exposure to non-compliance before it occurs. For example, Amtrak should consider an automated system report that would flag an asset proactively when a 2-year inventory deadline is approaching. During the observation process, management should ensure there is a review control within the process to validate that the asset is accurately tagged and such identifying information matches the equipment-tracking system. Additionally, this review control should also be performed when the asset is first logged into the equipment-tracking system. In the interim, until such processes are fully implemented, Amtrak should enhance the current control procedures surrounding the asset documentation and ensure that field personnel are aware of and consistently and carefully updating the asset records such that clerical/human errors are minimized and that the asset records contain the necessary asset details in order to properly track equipment by federal requirements. This would include enhancing the asset chain of custody recordkeeping so that such changes are identified and reported timely. Views of Responsible Officials Amtrak agrees with the recommendation to redesign key controls to help ensure that the monitoring of the observations happens on a preventive basis to help identify any exposure to non-compliance before it occurs. Amtrak recognizes that remediation of this finding will require an investment in the organization structure and the technology solutions available to the company. Since being created in early 2022 the Asset Management team has completed, with support from an outside consulting firm, a baseline assessment, as well as corrective action plans to specifically address noncompliance identified in the audit finding. To mitigate this finding, resources and investments are needed to address policy and governance around single auditable assets, the people and processes needed for a cradle-to-grave oversight of equipment management, and the technology needed to assist with creating and maintaining more robust internal controls, compliance, and timely audits. Efforts are underway that involve creating preventative internal controls, training of key personnel to help ensure that there is an end-to-end equipment lifecycle approach and accountability throughout an asset?s lifecycle, and the technology needed to support better location tracking of assets, the completion of audits, and recordkeeping. Finally, it is important to note that there has been a 31% year-over-year reduction in the total number of exceptions from thirty-six to twenty-five.
Finding 2022-001: Equipment and Real Property Management (Repeat Finding 2021-001) Program Name: National Railroad Passenger Corporation Grants COVID-19 National Railroad Passenger Corporation Grants Assistance Listing No. 20.315 Federal Award No.: FR-AMT-0020-20 FR-AMT-0022-21 FR-AMT-0025-22 FR-AMT-0026-22 Federal Agency: U.S. Department of Transportation Criteria The code of federal regulations ? 2 CFR 200.313 Equipment requires that: 1. Equipment must be used in the program or project for which it was acquired as long as needed, whether the project or program continues to be supported by the federal award or, when appropriate, under other Federal awards; however, the non Federal entity must not encumber the equipment without prior approval of the federal awarding agency (2 CFR 200.313(c) and (e)). 2. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data, including the date of disposal and sales price of the property (2 CFR 200.313(d)(1)). 3. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years (2 CFR 200.313(d)(2)). 4. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated (2 CFR 200.313(d)(3)). 5. Adequate maintenance procedures must be developed to keep the property in good condition (2 CFR 200.313(d)(4)). The code of federal regulations ? 2 CFR 200.303 ? Internal Controls requires that non-Federal entities must: 6. Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings (2 CFR 200.303(d)). Condition The following exceptions to the criteria were observed during the performance of the audit procedures: 1. For one of the equipment samples reviewed, it was observed that the asset did not have a unique asset identifier in the originally provided equipment population. 2. For seventeen of the equipment samples reviewed, it was observed that for six of them, the Condition data or Location field in the asset records was blank and, for twelve equipment samples, the Location field and/or Condition data per the asset records did not match the actual physical location and/or condition of the asset. We understand that was due to the assets records not being updated in a timely manner with the actual status of the equipment in the field. 3. During our procedures performed for seven assets, we identified that no inventory had occurred for the asset, even though it had been placed in service over two years prior and would have required an inventory prior to our observation. As this came to our attention after the inventory was required and during our observation procedures, we investigated further and could not obtain alternative evidence to support that an inventory had occurred within the two-year period. 4. This is a repeat finding that has occurred over the last several audit periods. As such, Amtrak has not taken sufficient actions when instances of noncompliance are identified through audit findings to make necessary updates to their internal controls. Questioned Costs None. Context We selected 60 equipment items for internal control and compliance testing of the above attributes. Exceptions as described in the Condition section above were noted for matters 2, 3 and 6 in the Criteria section above, indicating that internal controls were not functioning as designed. No exceptions were noted for matters 1, 4, or 5 in the Criteria section above. Amtrak has had the same repeat finding for the last several audit periods. As exceptions were noted related to matter 6 in the Criteria section above, Amtrak has not taken sufficient actions to address audit findings related to their equipment internal controls. Effect Amtrak is in non-compliance with the related grant agreement. Additionally, when assets are not accurately identified, it could lead to logistical inefficiencies as well as the difficulty in locating and identifying equipment timely. Cause The nature of much of Amtrak?s equipment is composed of moving assets that are on the tracks and operating up and down the corridors or around the yards or moving from location to location in a geographical region to achieve daily operational objectives. Furthermore, Amtrak resources are deployed such that managers and supervisors oversee geographical regions and equipment that are located throughout various routes that often connect through multiple states with many unmanned and less traveled stations. Asset locations, including changes on short notice for where the asset will be used, and frequent inspections occur in order to keep the equipment operating safely; however, the system of record is not always updated or updated in a timely manner to reflect the location and condition of the asset in the records upon a change in asset custody. Amtrak?s equipment policy, which is inconsistent with Uniform Guidance, currently requires that the condition field be confirmed and updated as part of the two-year inventory observation requirement. In reviewing management?s controls, the key controls identified by management are not designed such that consistent and timely proactive monitoring and/or review occurs to ensure that an inventory occurs no less than once every two years. There is an identified control that stipulates ?Capital Accounting staff contact personnel in each department to obtain updated information pertaining to the observation of every two-year inventory process.? This control as designed is not preventive and may not identify the non-compliance risk until after non-compliance occurs. For the instances where the unique identifier did not match the asset records, this was caused by a clerical/human error in recording the asset details in the system in addition to a lack of review control to verify the accuracy of the data recording. Identification as a Repeat Finding This finding was identified as a repeat finding in the immediate prior year as Finding 2021-001. Recommendation We recommend that Amtrak continue to work toward a full integration or reconciliation between Amtrak?s fixed asset system of record and the different equipment-tracking systems. We recommend that management consider redesigning one of its key controls to help ensure that the monitoring of the observations is occurring on a preventive basis to help identify any exposure to non-compliance before it occurs. For example, Amtrak should consider an automated system report that would flag an asset proactively when a 2-year inventory deadline is approaching. During the observation process, management should ensure there is a review control within the process to validate that the asset is accurately tagged and such identifying information matches the equipment-tracking system. Additionally, this review control should also be performed when the asset is first logged into the equipment-tracking system. In the interim, until such processes are fully implemented, Amtrak should enhance the current control procedures surrounding the asset documentation and ensure that field personnel are aware of and consistently and carefully updating the asset records such that clerical/human errors are minimized and that the asset records contain the necessary asset details in order to properly track equipment by federal requirements. This would include enhancing the asset chain of custody recordkeeping so that such changes are identified and reported timely. Views of Responsible Officials Amtrak agrees with the recommendation to redesign key controls to help ensure that the monitoring of the observations happens on a preventive basis to help identify any exposure to non-compliance before it occurs. Amtrak recognizes that remediation of this finding will require an investment in the organization structure and the technology solutions available to the company. Since being created in early 2022 the Asset Management team has completed, with support from an outside consulting firm, a baseline assessment, as well as corrective action plans to specifically address noncompliance identified in the audit finding. To mitigate this finding, resources and investments are needed to address policy and governance around single auditable assets, the people and processes needed for a cradle-to-grave oversight of equipment management, and the technology needed to assist with creating and maintaining more robust internal controls, compliance, and timely audits. Efforts are underway that involve creating preventative internal controls, training of key personnel to help ensure that there is an end-to-end equipment lifecycle approach and accountability throughout an asset?s lifecycle, and the technology needed to support better location tracking of assets, the completion of audits, and recordkeeping. Finally, it is important to note that there has been a 31% year-over-year reduction in the total number of exceptions from thirty-six to twenty-five.
Finding 2022-002: Preparation of Schedule of Expenditures of Federal Awards (Repeat Finding 2021-02) Program Name: Railroad Rehabilitation and Improvement Financing Program Assistance Listing No. 20.316 Federal Award No.: RRIF_2016_0040 Federal Agency: U.S. Department of Transportation Criteria The code of federal regulations ? 2 CFR 200.510(b)(5) and 2 CFR 200.502(b) require that: (a) For loan or loan guarantee programs described in 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule. (b) Loan and loan guarantees (loans). Since the Federal Government is at risk for loans until the debt is repaid, the following guidelines must be used to calculate the value of Federal awards expended under loan programs, except as noted in paragraphs (c) and (d) of 2 CFR 200.502: (1) Value of new loans made or received during the audit period; plus (2) Beginning of the audit period balance of loans from previous years for which the Federal Government imposes continuing compliance requirements; plus (3) Any interest subsidy, cash, or administrative cost allowance received. Condition The following exception to the criteria was observed during the performance of the audit procedures: In the preparation of the Schedule of Expenditures of Federal Awards (SEFA) which was provided to EY in relation to FY22 Uniform Guidance audit, Amtrak incorrectly presented the balance of the federal program Assistance Listing #20.316 - Railroad Rehabilitation and Improvement Financing by not reducing the loan amount by the FY21 loan repayments of $39 million. Amtrak provided EY an updated SEFA which corrected the presented balance to account for loan repayments made. Questioned Costs None. Context We have performed procedures to reconcile underlying data to amounts reported on the SEFA. Exception as described in the Condition section above were noted for the matter under 2 CFR 200.502 (b)(2) within the Criteria section, indicating that internal controls were not functioning as designed. Effect Amtrak?s control procedures in place as it relates to the preparation of the SEFA were not designed in such a manner that would timely identify the conditions noted. The effect of the condition above led to an initially overstated SEFA by $39.0 million. The SEFA within has been adjusted for this overstatement. Cause The exception from the criteria noted is attributed to the following cause: 1. Overall lack of familiarity with the Uniform Guidance Requirement stipulated within 2 CFR 200. Identification as a Repeat Finding The finding related to the Criteria above was identified as a repeat finding in the immediate prior year as Finding 2021-002. Recommendation To address the Condition identified above, we recommend Amtrak to ensure that SEFA preparation policy and review procedures that have been established address appropriate preparation of the SEFA in accordance with 2 CFR 200 requirements for presentation and disclosure. Additionally, management should consider requiring key Grants Management personnel take advanced Uniform Guidance training and annual updates, as made available. Views of Responsible Officials Amtrak agrees with the recommendation to review and enhance the SEFA preparation procedures to ensure full compliance with 2 CFR Part 200 requirements. In FY22 Amtrak expanded the grants management team and hired an additional Director level position to ensure the grants management team is adequately staffed. Amtrak recognizes the importance of keeping personnel up to date with changes to regulations and will consider providing Uniform Guidance training to key personnel on an annual basis.